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"Saving the Environment" and Steel
By Jim Stavis
This month's newsletter features environmental issues and steel. It will focus on recycling scrap metal, and the development of energy efficient buildings. Paragon Steel recently participated in two construction projects that embraced this "Green theme".
Why We Need Scrap
One of the primary benefits of using steel over other types of raw materials is that steel is recyclable. And like your neighbor's Toyota Prius, it is good for the environment. So I got to thinking, how does that used tin can or rusty automobile get recycled anyway? How much old steel does it take to make new steel? How is the scrap market determined anyway? What is the relation to the cost of new steel?
Today, there are two basic types of technologies used in steelmaking, both of which require old steel to make new. The basic oxygen furnace (BOF) process uses 25% to 35% old steel to make new. It produces such products as automobile fenders, encasement of refrigerators and packaging enclosures such as soup cans, five gallon pails and 55 gallon drums- whose major required characteristic is formability. The other technology is the electric arc furnace (EAF) process which uses virtually 100% old steel to make new. It produces such products as structural beams, steel plates, and reinforcement bars-whose major required characteristic is strength.
It may be surprising to learn that steel is the world's most recycled material and in the United States alone almost 69 million tons of steel were recycled or exported for recycling last year. This is done for economic as well as environmental reasons. It is always cheaper to recycle steel than to mine virgin ore and move it through the process of making new steel. Even though two out of every three pounds of new steel is produced from old steel, the fact that cars, appliances and bridges last a long time
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makes it necessary to mine virgin ore to supplement the production of new steel. Expansion of economies in the U.S. and across the globe makes it necessary to have resources beyond just scrap supplies.
One might think that it is necessary to use old soup cans to produce new ones or old cars to produce new ones. But the fact is an old car can be melted down to produce a new soup can, and then as the new soup can is recycled, it is melted down to produce a new car, appliance or perhaps a structural beam used to repair a portion of the Golden Gate Bridge. It's that simple.
Most businesses do not put too much thought into their scrap management, but they should. There are things that can be done to enhance the value of their scrap, plus dealing with reputable scrap yards is a must. Because scrap is considered a byproduct of a customer's steel purchases, they do not concern themselves with the games that scrap dealers can play. Some may alter weight tickets as a way to devalue the amount that is paid and others use cash as a way to avoid closer scrutiny as well as taxes. Be careful and know your scrap dealer - get references before switching from one dealer to another.
Many dealers will promise an inflated price quotation and then modify it once they have your business. Scrap as a commodity has its own pricing index. The American Metal Market publishes the scrap rate each week. Companies that generate scrap should know what the market is for scrap and the type that they generate. If you take the word of your scrap vendor, you will likely get shorted. The scrap market rises and falls according to the production supply of steel manufacturers. In 2004 when supply was short and demand was great, it was generating high prices for scrap. The market has receded from this point, but scrap is still high and should be for awhile.
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The Green Theme and Construction
By Jim Stavis
Last month Paragon Steel received a fabrication order from a company called New Vision Technologies. They design and install solar panels at the top of garages structures to save energy for large institutional accounts (i.e. hospitals, schools, etc.).
Paragon Steel manufactured the frames that held the solar panels in place per the customer's design. It has been found that companies can boost profits while "doing good" for the environment at the same time.
During 2004, approximately 2% of the nation's new, non-residential construction
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market was green, with a value of $3.3 billion. By 2010, it is forecasted that green buildings will range between 5% and 10% adding up to between $10.2 billion and $20.5 billion.
This is quite an extraordinary rate of growth, but it makes good economic sense. Energy is consistently in the top five expense items for most companies, so it has always mattered. But now companies are viewing it as a way to gain an advantage over their competitors.
Ford Motor Company has achieved an 18% reduction in their energy consumption during the past five years, thanks in part to a green building commitment. This included extensive renovations in the installation of more efficient heating, cooling, lighting and water utility systems.
What about expense? Some of it is offset by state tax credits. Plus the return on investment in terms of savings pays for the cost in a reasonably short period of time. If you look around, you will see the green theme is everywhere. It seems that every day will be St. Patrick's Day.
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Quote of the Month
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| "One man's scrap is another man's treasure" |
| –Unknown |
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